GM struggles to show value of Chevrolet in China, other emerging markets

February 2, 2014

Dan Akerson, second from right, then-chairman and CEO of General Motors, takes part in a ceremony in Shanghai on June 19, 2013. GM broke ground on a $1.3 billion plant in Shanghai to produce Cadillacs as it seeks a larger share of China's growing market for luxury cars. / Peter Parks/Agence France Presse/Getty Images

Detroit Free Press Business Writer

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A Chevrolet Volt electric car being charged in a parking lot at General Motors China headquarters in Shanghai. Even as Chinese cities fight off pollution, sales of gas-guzzling SUVs are blazing past those of greener-energy cars even though the latter enjoy official backing. / Peter Parks/Agence France Presse/Getty Images

Chevrolet's Cruze sedan is a top seller in China, and the hatchback was shown at the Shanghai auto show. / Nathan Bomey/Detroit Free Press

General Motors’ quest to transform Chevrolet into a global powerhouse remains a work in progress.

New CEO Mary Barra must grapple with the fact that Chevy’s sales are flat globally. Without GM’s popular pickup trucks they would be stagnant in the U.S., too.

“There’s still a lot of room to make sure customers really understand the value that Chevrolet provides,” Barra said in her first sit-down with the news media since her Jan. 15 appointment.

In America, Chevy will trumpet its message amid the cacophony of Super Bowl ads tonight. But the year-old “Find New Roads” tagline has not yet resonated beyond the loyal base of Chevrolet buyers.

Factor out the Silverado pickup truck and Chevy sales rose only 2% in the U.S. in 2013, well below the industry’s 7.6% growth. Still, GM believes it has the right lineup to position Chevy for expansion.

After sweeping both 2014 North American Car and Truck of the Year awards at the Detroit auto show last month with the Silverado and Corvette Stingray, Tim Mahoney, Chevrolet’s global marketing chief, has grounds for some boasting.

Last year Chevy introduced 13 new or freshened models in the U.S., giving Mahoney the confidence to invest about $16 million for the most expensive television time in American media.

“We have the products to support it,” Mahoney said.

Emerging markets challenge

But GM and its competitors have placed even larger wagers on growth in places such as China, eastern Europe and South America and there the scoreboard isn’t so encouraging.

Late last year, GM pulled Chevy out of Europe, except for the Corvette, to reduce the competition with its Opel and Vauxhaul models.

Analysts applauded the move as a fiscally responsible acknowledgment that Chevy wasn’t working in Europe. But the move marked a blow to GM’s strategy of transforming Chevrolet into a truly global brand.

The pace of Chevy’s growth in China consistently trails that of its sister GM brands Buick and Cadillac.

All of which calls into question the wisdom of Chevy’s controversial $559-million marketing deal with European soccer franchise Manchester United. Yes, ManU has legions of fans in China, but it’s unclear what, if any, impact the tie-in is having on Chevy dealers in China.

Chevy is the seventh-best selling brand in China, according to IHS Automotive data, compared to third in the U.S.

“Our brand is very young in the Chinese market,” said Alan Batey, GM’s global Chevrolet chief and president of North America. “So we’re still working on aiding awareness, opinion and consideration. We’ve grown fast in a fast-growing period of time. We’re going to be able to take that to the next level.”

Mark Reuss, GM’s global product chief, said one of his top objectives after taking the new job is to inject life into the brand’s lineup in China, where the Cruze and Sail sedans are top sellers.

But good products aren’t enough.

“No question their products have improved dramatically, and the examples include the Impala as well as the Sonic and the trucks,” IHS analyst Tom Libby said. But “if you put yourself in the mind and the head of the consumer who’s shopping for value what would pull them to Chevrolet? I think that’s something that’s lacking right now.”

Competition keeps getting better too

Here in the U.S., Silverado, Corvette and Impala have impressed critics and consumers, but taking large numbers of customers away from Ford, Toyota, Honda or Nissan is a long-term proposition.

“Even if Brand X is doing great, so are brands Y, Z and A through W,” said Karl Brauer, a Kelley Blue Book analyst. “It’s not just that you can’t have weaknesses anymore.”

Chevy must continually evolve to keep pace with its competitors. In a segment where GM has long thrived — pickup trucks — there’s a new threat coming around the corner: the aluminum-body 2015 Ford F-150, which goes on sale between October and the end of this year.

If consumers embrace the new F-150, it could slow Chevrolet’s momentum after releasing acclaimed redesigned pickups in 2013.

“The new Silverado and Sierra, functionality and feature wise, are superior” to the outgoing F-150, Libby said. “But they’ve lost it now because of all the visibility being given to the new F-series.”

GM has hinted that powertrain improvements for the pickup trucks are on the way, which could mitigate Ford’s quantum fuel economy improvements by the aluminum F-150.

“GM probably doesn’t get enough props from consumers for the enormous progress it has made on the product side,” Morgan Stanley analyst Adam Jonas said in a research note. “If they aren’t getting credit now, when will they? GM is in the middle innings on its product re-invention, but there’s still work to do and bar is constantly rising.”